Steven Parker Owns and Operates Steven's Septic Service and Legal

question 40

Multiple Choice

Steven Parker owns and operates Steven's Septic Service and Legal Advice.Steven's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial.Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:

Expected costs in the service departments for June are as follows:
$$\begin{array} { | l | r | r | } \hline & \text { Clerical } & \text { Janitorial } \\\hline \text { Variable costs } & \$ 12,000 & \$ 4,200 \\\hline \text { Fixed costs } & \$ 8,400 & \$ 800 \\\hline\end{array}$$ Under the direct method of allocation,what is the total amount of service cost allocated to the Legal Advice operation for June? (Round all calculations to the nearest whole dollar. )

• A) $6,231.
• B) $7,720.
• C) $8,640.
• D) $9,330.

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Definitions:

Period Costs

Period costs are expenses that are not directly tied to production activities and are expensed in the period they are incurred; examples include administrative salaries and marketing costs.

Value Chain

The series of activities and processes that a company performs to add value to its product or service, from raw materials to final product delivery.

Management Functions

Fundamental tasks carried out by managers to achieve organizational goals, typically including planning, organizing, leading, and controlling.

Industry Averages

Statistical metrics that summarize the average performance, behavior, or characteristic of companies within a specific industry.